Research Group: US Economic Recovery Around the Corner - 2002-01-23

A key U.S. business research group says the U.S. economy is moving toward recovery, with the major forces propelling an economic turnaround already in evidence. The New York-based Conference Board released its latest forecast Wednesday. Economic growth is expected to be slow in the coming months. The Conference Board predicts U.S. Gross Domestic Product will rise only about 1.3 percent this year.

But Board economist Ken Goldstein says the worst of the recession is probably over. The U.S. job market is stabilizing, American consumers are showing new strength and, generally, the stage is set for a major turnaround in corporate profits.

"So there's a process here in terms of easing out of the profit squeeze, of easing out of the consumer decline, and slowly, we are not there yet, of moving out of the global slowdown, that is helping domestically to build up this head of steam toward a new expansion, that could be underway by spring," said Mr. Goldstein.

Consumers hold the key to a rebound, accounting for about two-thirds of the U.S. economy. Confidence slipped last year. Spending was down. But the Conference Board believes that is all in the past. Economist Ken Goldstein explains: "Clearly the response late in the recession to zero-percent financing on cars, to 40 percent discounts on appliances, clothing and furniture show the consumer lost the willingness to spend but not the ability to spend."

But don't look for confirmation of the optimistic view on Wall Street, at least not yet. The stock market is going through what experts call a correction, that is, stock values are being readjusted downward to more realistic prices. Corporate earnings are still disappointing. Companies, for the most part, are making the grade. But according to market analyst Art Cashin, that is only because expectations have been sharply reduced. "Yes, they're beating the lowered estimates," he said. "But in some cases, that's like having your parents convinced that you might get expelled from school, and only failing a couple of subjects. So, I mean that's better than expectations."

Still, predictions of a turnaround for U.S. business are welcome on Wall Street. The terrorist attacks of September 11 plunged economic forecasters into some of their darkest moments. But, according to the latest Conference Board report, the United States appears to have come out of that tragedy with relatively minor economic damage.